Euro zone business growth remained lackluster in August -PMI

Published Wed, Sep 4 2019 4:00 AM EDT

LONDON, Sept 4 (Reuters) - - August final composite PMI

51.9

- PMI points to Q3 GDP growth of 0.2% -IHS Markit

Euro zone business growth was a touch faster than expected last month but remained in the doldrums as the bloc's dominant service industry only partially offset a slowdown in manufacturing, a survey showed on Wednesday.

Worryingly for policymakers at the European Central Bank, who are widely expected to loosen monetary policy next week, forward-looking indicators in the survey imply there won't be a turnaround anytime soon.

IHS Markit's Euro Zone Composite Final Purchasing Managers' Index (PMI), considered a good gauge of overall economic health, nudged up 51.9 in August from July's 51.5.

That pipped a preliminary reading of 51.8 but held dangerously close to the 50 mark separating growth from contraction.

"The euro zone remained mired in a fragile state of weak and unbalanced growth in August," said Chris Williamson, chief business economist at IHS Markit.

Williamson said the PMI, barring any substantial change in September, pointed to economic growth of just 0.2% this quarter, matching the forecast in a Reuters poll. He noted official data suggested growth could be even weaker.

A sister survey released on Monday showed manufacturing activity contracted for a seventh month in August but Wednesday's release showed services growth accelerated. The PMI rose to 53.5 from July's 53.2, above the flash 53.4 reading.

"The big question is how long this divergence can persist before the weakness of the manufacturing sector spreads to services and households," Williamson said.

Forward-looking indicators for the services survey suggest not long. Hiring was curtailed, backlogs of work were run down and optimism was its weakest in nearly five years.

The services employment sub-index dipped to 53.2 from 53.5, the lowest since the start of the year, and an overall future output sub-index dropped to a more than six-year low of 55.4 from 58.8.

- Detailed PMI data are only available under license from IHS Markit and customers need to apply for a license.